These stocks are a good bet for long-term gains.
With the longest bull market in history firmly in the rearview, many investors are nervous about the state of the economy. Inflation rates have skyrocketed despite the Federal Reserve’s best efforts, surpassing 9% in June 2022. The red-hot housing market is cooling off, causing would-be real estate investors to look elsewhere. The labor market is still strong; recent data showed unexpected job gains and record-high employment levels. But that could put more pressure on the Fed to deliver further interest rate hikes. Worried about a potential recession, some investors are crafting more defensive portfolios and focusing on long-term, buy-and-hold investing. Each of the seven stocks on this list has a proven track record of performance, strong fundamentals and the ability to weather market fluctuations.
Amazon.com Inc. (ticker: AMZN)
Despite increased competition and inflationary pressures, Amazon has demonstrated tremendous growth, and its share price has increased 1,090% over 10 years as of Aug. 8. Although Amazon is known for its online retail business, the company’s real strength is in its leading cloud business, Amazon Web Services, according to Warwick Simons, principal and portfolio manager at WS Portfolio Advisory LLC in the Seattle area. AWS generated about a 29% operating margin and year-over-year net sales growth of about 33%, compared with Amazon’s overall 7% sales growth, in the second quarter of 2022. Other businesses are still relatively new to the transition to cloud-based computing, Simons says, so this aspect of Amazon’s business should continue to grow rapidly through at least 2025. Recent market downturns have also brought Amazon’s valuation down to levels that haven’t been seen in several years, a good opportunity for investors looking for long-term stocks.
American Express Co. (AXP)
Known for its premium credit cards, American Express has also been a go-to choice for long-term investors. American Express was the second-highest issuer of general purpose credit cards in the U.S. in 2021 based on its $868 billion purchase volume, lagging just behind JPMorgan Chase & Co. (JPM), according to a chart by Nilson Report. It reported better-than-expected second-quarter results in 2022, with revenue growing 31% year over year, to $13.4 billion. American Express’ valuation is reasonable considering its stable business operations and potential for growth, analysts say. In the second quarter, it reported continuing high levels of customer retention with historically low levels of delinquencies and write-offs.
Bank of America Corp. (BAC)
Bank of America is a top holding of Berkshire Hathaway Inc. (BRK.A, BRK.B), Warren Buffett’s holding company, with a roughly 13% stake, making up 9.8% of the portfolio in 2022. Buffett’s endorsement is an indicator of the strength of the stock, says Danielle Miura, a certified financial planner and founder of Spark Financials. If the Fed continues to increase rates, Miura says, Bank of America will likely experience a rise in net interest income. And thanks to its recent investments in technological innovation to reduce its operating expenses, the company is in a strong financial position. Bank of America has a history of steady performance, and its share price has gained more than 400% since August 2012.
Berkshire Hathaway Inc. (BRK.B)
Berkshire Hathaway is a standout pick for long-term investors because it is a diversified conglomerate with superior management, says Robert Johnson, a chartered financial analyst and professor of finance at Creighton University’s Heider College of Business. Berkshire Hathaway owns businesses in various industries, including insurance, transportation and manufacturing. Since Buffett still runs Berkshire Hathaway, it should be no surprise that it has produced steady returns. Johnson says Berkshire Hathaway is positioned well for the future because Buffett has assembled an all-star team that is capable of successfully managing the company going forward.
Coca-Cola Co. (KO)
As one of the largest beverage companies in the world, Coca-Cola is a household name. But it has way more going on than just its signature drink, says Johnson. The original Coca-Cola line makes up 47% of its worldwide unit case volume, but other products, particularly sparkling water, are increasingly popular. In fact, 38% of the company’s portfolio in 2021 was made up of low- or no-sugar products. Johnson believes the company has exhibited a strong ability to adapt to consumer preferences, with 12% growth in net revenue in the second quarter of 2022, to $11.3 billion. A sweetener for investors is KO’s 2.8% dividend yield.
Comcast Corp. (CMCSA)
Investors looking for a long-term stock to buy should take a look at Comcast, as Morningstar analysts say it’s undervalued now. Despite recent dips in price, the telecommunications company has a track record of strong performance. In 2021, Comcast generated $116.4 billion in revenue, about a 12% increase over its $103.6 billion in revenue in 2020. In January it also raised its annual dividend by 8% to $1.08 per share, for a current yield of 2.8%, its 14th consecutive annual increase. Beyond its Xfinity internet services, Comcast is also the parent company of NBCUniversal and Sky Group. Because of its wide range of businesses, Comcast has been able to weather market volatility and is well positioned for long-term growth.
Costco Wholesale Corp. (COST)
While other companies have experienced significant supply chain issues as a result of the war in Ukraine and COVID-19 lockdowns in China, Costco is less affected by those problems because it is less reliant on internet sales and shipping services, Miura says. In fact, only about 7% of Costco’s global sales come from e-commerce. Costco has also been able to boost its membership base and annual retention rate over time, making the company more profitable. Plus, for the retail month of June 2022, Costco reported a 20% increase in net sales over a similar period last year. COST’s share price has increased 639% over 10 years as of Aug. 8, showing Costco is more than able to roll with the market’s punches.
7 of the best stocks to buy and hold for the long haul:
— Amazon.com Inc. (AMZN)
— American Express Co. (AXP)
— Bank of America Corp. (BAC)
— Berkshire Hathaway Inc. (BRK.B)
— Coca-Cola Co. (KO)
— Comcast Corp. (CMCSA)
— Costco Wholesale Corp. (COST)
More from U.S. News
Update 08/09/22: This story was published at an earlier date and has been updated with new information.